The Impact of Centralized Drug Procurement on Drug Prices and Utilization in China

This study investigated the impact of China’s centralized drug procurement (CDP) on drug prices, utilization, and expenditure in China. Employing the event study method, we estimated the impacts for both contract-awarded (hereafter, “approved”) drug products and unawarded (hereafter, “unapproved”) products in the same molecule-dosage forms. The results show that the CDP decreased the prices of the approved drug products by 66.7% on average. Moreover, unintendedly, the CDP also pushed the prices of the unapproved products down by 25.9%. After the inception of the CDP, the quantities sold of the approved and unapproved products rose by four times and fell by 75.4%, respectively. With these estimates, we concluded that the CDP saves 252.2 billion yuan (equivalent to 38.8 billion US dollars) annually in drug expenditure.